1n. Preliminary approval of Ind. Dev Rev Bonds for Robert Auto Products 11 C.
ITY OF
in •
CHANHASSEN
690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
(612) 937-1900
1 MEMORANDUM
TO: Don Ashworth, City Manager
FROM: Todd Gerhardt, Assistant City Manager 3 '
1
DATE: August 9 , 1989
SUBJ: Proposed Industrial Revenue Bonds ( IRB) for Roberts Automatic
Products, Inc.
Attached is a resolution requesting preliminary approval for
financing under the Municipal Development Act for Roberts
1 Automatic Products, Inc. Roberts Automatic Products is con-
sidering the construction of an approximate 40 , 000 sq. ft. office
and manufacturing building on Lot 3 , Block 2, Chanhassen Lakes
1 Business Park Second Addition. The principal amount needed to
finance their project is $2 .1 million.
This request represents a "no risk" position to the City. The
1 bonds would be solely backed by the company selling the bonds.
The tax exempt feature of IRB financing produces net interest
costs of approximately 2% lower than conventional financing.
The State of Minnesota is currently handling the IRB allocation
(verification of qualification/state limitations, etc. ) . In the
State' s application process, they require a large deposit to weed
out only the sincere applicants.
Currently all the monies allocated to the state have all been
1 issued. However, the state requirements for deposit is due this
September and Roberts is hoping that some of the companies making
application for these funds will not be able to meet the state
1 requirements for deposit, thus freeing up additional monies for
their application.
1 Roberts has been made aware of the fact that they must fund the
full amount of the state deposit ( the city is the one who makes
the application) and that their ability to receive a refund of
the deposit will be solely based on whether the state reimburses
1 the city.
The Council should also be aware that the City does have a policy
of requiring all IRB applications to pay one-half of one percent
1
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Mr. Don Ashworth
August 9 , 1989
Page 2
of the par value of the proposed issue ( $2.1 million) as an admi-
nistrative fee. Roberts has paid $500 towards the initial fee
and the remaining portion of this fee will be paid if Roberts is
successful in being issued an IRB application.
Recommendation
Staff recommends that the City Council give preliminary approval
to Roberts Automatic Products, Inc. , and its request for ,
financing under the Municipal Industrial Development Act for the
construction and equipping of a 40, 000 sq. ft. office and manufac-
turing facility. I
Attachments
1. Resolution.
2 . Application for IRB.
3 . Roberts Automatic Products , Inc. , Information
4 . Site Location. '
Manager ' s Comments : Federal regulations regarding eligibility
for industrial revenue bonds are so stringent and funding so
limited to assure that no more than two or three applications
can be considered during any one year [as soon as you say
something like this , you will get 10 applications] . IRB eligibil-
ity standards now exclude all forms of commercial projects as
well as most industrial except if manufacturing standards can be
met, i .e. previous issues include Lyman Lumber ( 1979 and 1988) ;
Gedney Pickle (1978 and 1985) ; etc. Approximately ten issues
have been applied for and approved during the past ten years. As
noted by Todd, this issue will be a private placement and repre-
sent
a no- risk position for the City.
Approval is recommended.
1 ..
CERTIFICATION OF MINUTES RELATING TO
INDUSTRIAL DEVELOPMENT REVENUE BONDS
Issuer : City of Chanhassen, Minnesota
Governing Body: City Council
Kind, date, time and place of meeting: A regular meeting, held
on August 14, 1989 , at o 'clock P.M. , at the City Hall .
Members present :
Members absent :
' Documents Attached:
Minutes of said meeting (pages) :
RESOLUTION NO.
RESOLUTION GIVING PRELIMINARY APPROVAL TO A
PROJECT ON BEHALF OF ROBERTS AUTOMATIC PRODUCTS,
INC. AND ITS FINANCING UNDER THE MUNICIPAL
INDUSTRIAL DEVELOPMENT ACT
' I , the undersigned, being the duly qualified and
acting recording officer of the public corporation issuing the
obligations referred to in the title of this certificate,
certify that the documents attached hereto, as described above,
have been carefully compared with the original records of the
corporation in my legal custody, from which they have been
' transcribed; that the documents are a correct and complete
transcript of the minutes of a meeting of the governing body of
the corporation, and correct and complete copies of all
resolutions and other actions taken and of all documents
approved by the governing body at the meeting, insofar as they
relate to the obligations; and that the meeting was duly held
by the governing body at the time and place and was attended
' throughout by the members indicated above, pursuant to call and
notice of such meeting given as required by law.
' WITNESS my hand officially as such recording officer
and the seal of the City this day of August, 1989 .
' Signature
' Don Ashworth, City Manager
Name and Title
1
, i
Councilmember moved for adoption of
the following resolution: i
RESOLUTION NO.
RESOLUTION GIVING PRELIMINARY APPROVAL TO A
PROJECT ON BEHALF OF ROBERTS AUTOMATIC PRODUCTS,
INC. AND ITS FINANCING UNDER THE MUNICIPAL
INDUSTRIAL DEVELOPMENT ACT
BE IT RESOLVED by the City Council of the City of
Chanhassen, Minnesota (the City) , as follows :
SECTION 1
Recitals and Findings
1. 1. This Council has received a proposal from Roberts
Automatic Products, Inc. , a Minnesota corporation (the
"Company" ) that the City finance a portion or all of the cost
of a proposed project under Minnesota Statutes, Sections
469 . 152 through 469 . 165 (the Act) , consisting of the
acquisition by the Company of land located in the City and the
construction and equipping thereon by the Company of an
approximately 40, 000 square foot office and manufacturing
facility (the Project) . The legal description of the land on
which the Project is proposed to be located is Lot 3 , Block 2 ,
Chanhassen Lakes Business Park 2nd Addition. Representatives
of the Company have proposed that the City issue revenue Bonds
under the Act in the principal amount of approximately
$2 , 100, 000 to finance the Project. i
1 .2 . Based on representations by representatives of the
Company and such other facts and circumstances as this Council
deems relevant, this Council hereby finds , determines and
declares as follows :
(a) The welfare of the State of Minnesota requires
active promotion, attraction, encouragement and development of
economically sound industry and commerce through governmental
acts to prevent, so far as possible, emergence of blighted
lands and areas of chronic unemployment, and the State of
Minnesota has encouraged local government units to act to
prevent such economic deterioration.
(b) The Project would further the general purposes
contemplated and described in Section 469 . 152 of the Act .
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(c) The existence of the Project would add to the tax
base of the City, the County and the School District in which
the Project will be located and would provide increased
opportunities for employment for residents of the City and
surrounding area.
(d) This Council has been advised by representatives
of the Company, that conventional, commercial financing to pay
the cost of the Project is available only on a limited basis
and at such high costs of borrowing that the economic
feasibility of constructing and operating the Project would be
significantly reduced, but that with the aid of municipal
borrowing, and its resulting lower borrowing cost, the Project
is economically more feasible.
' (e) The City is authorized by the Act to issue its
revenue bonds to finance capital projects consisting of
properties used and useful in connection with a revenue
producing enterprise, such as that of the Company, and the
' issuance of the bonds by the City would be a substantial
inducement to the Company to acquire, construct and equip the
Project .
SECTION 2
' Determination To Proceed with
the Project and its Financing
2 . 1. On the basis of the information given the City to date,
it appears that it would be desirable for the City to issue its
revenue bonds under the provisions of the Act to finance the
Project in the maximum aggregate face amount of $2 , 100, 000 .
2 . 2 . It is hereby determined to proceed with the Project and
its financing and this Council hereby declares its present
' intent to have the City issue its revenue bonds under the Act
to finance the Project . Notwithstanding the foregoing,
however, the adoption of this resolution shall not be deemed to
establish a legal obligation on the part of the City or this
Council to issue or to cause the issuance of such revenue
bonds . All details of such revenue bond issue and the
provisions for payment thereof shall be subject to final
' approval of the Project by the Minnesota Department of Trade
and Economic Development and may be subject to such further
conditions as the City may specify. The revenue bonds, if
' issued, shall not constitute a charge, lien or encumbrance,
legal or equitable, upon any property of the City, except the
revenues specifically pledged to the payment thereof, and each
bond, when, as and if issued, shall recite in substance that
the bond, including interest thereon, is payable solely from
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the revenues and property specifically pledged to the payment
thereof, and shall not constitute a debt of the City within the
meaning of any constitutional statutory limitation. ,
SECTION 3
Application for Allocation of Bonding Authority '
and Ratification of Prior Resolution
3 . 1 At the request of the Company, the Mayor is hereby
authorized to submit to the Minnesota Department of Trade and
Economic Development an Application for Allocation of Bonding
Authority in the amount of up to $2, 100, 000 for the Project,
upon deposit by the Company with the City of an amount equal to
the application deposit in connection with such Application.
Any amount of such deposit returned to the City shall be paid
to the Company.
Adopted this 14th day of August, 1989 . '
1
Mayor
. '
Attest :
City Manager
The motion for the adoption of the foregoing
resolution was duly seconded by Councilmember '
and, upon vote being taken thereon, the following voted in
favor thereof :
and the following voted against the same :
11
whereupon the resolution was declared duly passed and adopted
and was signed by the Mayor, which signature was attested by
the City Manager . '
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I CITY OF CHANHASSEN
690 COULTER DRIVE - CHANHASSEN, MINNESOTA 55317
Fee: $500 . 00
I A� lication For Industrial Development Financing
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1 . APPLICANT - << ,
lc_ a. Business Name - f15 l�i5 Au"r-eKA'rnc- !iz'otcr5 .1,O ,-(.0-,,--
b. Business Address - 44-67 to cei ' 5'i
III t1 P75 th tu 564-35-
c . Business Form (Corporation, Partnership, Sole
IProprietorship, etc. ) CNpi Stiff CNµp'12.- `5
d. Authorized Representative - aML7-Ew 6 HC96-IZ/S
Ie. Phone - Z02_- ,635=-5,c95-
I 2 . NAME (S) OF MAJORITY STOCKHOLDERS, OFFICERS & DIRECTORS,
PARTNERS, PRINCIPALS -
a. t0/41-7-ER 6/74150275 flz65, en fie. ri/out-k-
I gm .rc9 03e 2T5 V,R 10C
b.,fcr.r H foicKsel , V.P. 6/Pi-1
c• f-f'cn%ru-u L oi_e /Z& , v'.F. /A)C&
d. JA ri cS L, HAR12 Y , 0IfZE iOIL-
/MR-L 5 Ccrvpi/1' 17/u ' K
I e.
3. GIVE BRIEF DESCRIPTION OF NATURE OF BUSINESS:
ISG/Z.C.0 0 /l%icHli, E Ji,is S/f c2"7
4 . LEGAL DESCRIPTION OF BUSINESS SITE:
IAT 3 LC`CK Z , 2 '=` /.) Goirf
IV 0
r �/A 1 ki n55t,U /./ (‹ fli. /ic.)L5 19/4 ac 2
1 5 . ADDRESS OF BUSINESS SITE:
O
8 1
6 . AMOUNT OF BOND ISSUE BEING REQUESTED: `'U`a 989
$ C c3� c`r`i C.a i 1 v� ist4AN A
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7. PURPOSE OF REQUESTED FINANCING:
a. New Facility? (Describe)
f5 /LO 9G,0`t`Z' f,L a ,5. 71 Acries UJiTrf
-re 49e,e-c-c iTira fez-
i. Floor Area in Square Feet
b. Expansion? (Describe) ,
i. Floor Area in Square Feet
c. Will Bond Financing Be Used to Acquire Land? /A/Z•TLY I
8 . HAVE YOU APPLIED FOR CONVENTIONAL FINANCING? No
a. Name Lenders Contacted -
9. BUSINESS PROFILE:
a. Are You Located in City Now? L-1)//\14
'
b. Number of Employees in Chanhassen -
i. Before this Project - ,
ii. After this Project - z
iii. Collective Bargaining Units (Unions)
Representing Employees - NOn}�
c . Approximate Annual Sales -
$ ‘,, Qcc, 00e
d. Number of Years in Business - 2
e. Do You Have Plants in Other Locations? If so, where?
Nc�
10 . NAMES OF :
a. Underwriter - SFr/Z J/Frr Beare 'b
Y
(Application must include letter of intent from ,
underwriter or financial analysis by your consultants
required by Commissioner of Securities. )
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' b. Bond Counsel - IPp/zSGY a'Hir 'LY
' c . Corporate Counsel - //-?/LI/A.%' Pert:HAa
' d. Accountants - 56c,' `N/GH L`>�'�L' � fcirLLf2-
(Earnings statements for past 5 years and latest
balance sheet must be attached. )
11. HAVE YOU EVER BEEN IN BANKRUPTCY? NO
DEFAULTED ON ANY BOND OR MORTGAGE COMMITMENT? ,4h
' If so, give details.
12. WHAT IS YOUR TARGET DATE FOR:
a. Construction Start - 0/90
b. Construction Completion - 05-1/C
13 . FINANCIAL REFERENCES:
' a. Bank - /0717706441_ oil y
b. Mortgage - /40//0 GAT y' 0C-l2.41Ca
c . Other ID Bonds, if any (Give Name of Trustee) - ;i()04,7E
By the execution and submission of this application, Applicant
' acknowledges that the City of Chanhassen reserves the right to
deny any application for municipal industrial revenue financing
at any stage of proceedings prior to the adoption of the resolution
' authorizing issuance of industrial development bonds or revenue
notes.
Applicant further agrees to deposit with the City at the time of
making this application a sum of money , as determined by the City
Manager , to be used to defray all City administrative costs and
legal and consultive fees associated with the City' s consideration
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of the application. In addition, Applicant agrees to pay upon
demand such amount of City expense as shall be in excess of the
deposit.
/OOE/Z7T /14(Tritii477C �/fioucTS II
APPLICANT
7� �'� )57,6_5 1
By L /tJ / l �
Date g17/g I
9
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For further information contact:
TODD GERHARDT, ASSISTANT CITY MANAGER
City of Chanhassen
690 Coulter Drive
Chanhassen, MN 55317
(612) 937-1900
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oL,1;';Ci/ ,t' y,'•.f.t4r ,.'. ctc_e7 " _!
•1,' ) PIPER,JAFFRAY&HOPWOOD
MUMS MEMBERSIPGMEMBERNEW YORK STOCK EXCHANGE INC
I Piper Jaffray Tower
Post Office Box 28
Minneapolis, Minnesota 55440
I �i.0 �% 612-342-6000
July 26, 1989
IMr. Walter G. Roberts Q P R04 . Mr. James D. Hardy
President Vice President - Finance
I Roberts Automatic Products, Inc. Farmhand, Inc.
4451 West 76th St. Excelsior, MN 55331
Minneapolis, MN 55435
IDear Gentlemen:
II enjoyed our meeting Monday at the Dorsey office and look forward to working with you both
on your financing. After our meeting, I went back and talked with several of our institutional
sales people about placing your debt and can share the following:
I . Piper Jaffray has a relationship with a large Minnesota tax-exempt mutual fund that
has an interest in buying small issue industrial development bonds from Minnesota.
They would require a letter of credit from a major institution such as First Bank or
Norwest and probably would not accept a letter of credit from National City Bank.
I If they were to purchase your bond, they probably would accept amortization for a
20-year period and would require a balloon or put in the fifth or tenth year.
Estimated rates in today's market are approximately 7-1/2%.
I . Piper also has a relationship with a large domestic corporation that has an appetite
for IDB's for their own portfolio. They also would require a letter of credit,
however, they would be willing to accept a letter of credit from National City Bank.
1 Again, their interest rate is approximately 7-1/2% and they would be looking at an
amortization of 20-25 years with a put or balloon in the fifth or seventh year.
. Small issue industrial development bonds sold without a letter of credit would be
I difficult to do. If we were successful in placing your bond without enhancement, our
reading is you would need significant equity to the point that it probably wouldn't
be very attractive to you, the borrower.
I understand all of the state's allocation was taken Monday. I keep in constant contact with the
people at the state and will let you know if there appears an allocation will be available.
Sincerely,
PIPER, JAFFRA & HOPWOOD INCORPORATED
I /46/7 ,_ 4-1440 --------
Stepht J. h' li
Managing Dire
ISJY/gla
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SEVENICH, BUTLER, GERLACH & BRAZIL, LTD.
Certified Public Accountants ,
ST. PAUL, MINNESOTA
II
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Roberts Automatic Products, Inc.
Minneapolis, Minnesota ,
We have audited the accompanying balance sheets of Roberts Automatic Products, ,
Inc. (a Minnesota corporation) as of December 30, 1988 and January 1, 1988, and
the related statements of income and retained earnings, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing stan- ,
dards. Those standards require, that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mat-
erial misstatement. An audit includes examining; on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles 'used and significant estima-
tes !Wade by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairy, in
all material respects, the financial position of Roberts Automatic Products,
Inc. as of December 30, 1988 and January 1 , 1988, and the results of its opera-
tions and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules of cost of goods sold, labor and
manufacturing expenses, selling and administrative expenses, and five year sum-,
mary on pages 10 through 13 are presented for the purpose of additional
analysis and are not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and , in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
Sevenich , Butler, Gerlach & Brazil , Ltd.
St. Paul , Minnesota
February 15, 1989 '
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. ' ROBERTS AUTOMATIC PRODUCTS, INC.
BALANCE SHEETS
December 30, 1988 and January 1 , 1988
December 30, January 1 ,
1988 1988 '
ASSETS
IICURRENT ASSETS
Cash $ 145,725 $ 164,263
II Accounts receivable - Trade , less allowance for '
doubtful accounts ($30,000 at December 30, 1988
and $16,290 at January 1 , 1988) 713,474 656,778
I Notes receivable 2,500 30,000
Other receivables 3,100
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Advances to employees 1,907 240
I Recoverable income tax payments 46,000 -
Inventories 1 , 106,157
959,732
Deferred income taxes - 42,985
' Prepaid expenses 15,471 19,221
IITOTAL CURRENT ASSETS 2,034,334 1 ,873,219
' PROPERTIES 1 ,729,434 1 , 166,535
MORTGAGE LOAN COSTS 941 1 ,480
I $3,764 ,709 $3,041 ,234
LIABILITIES AND STOCKHOLDERS EQUITY
1 CURRENT LIABILITIES
Bank line of credit $ 285,000 $ -
' Current portion of long-term debt and lease obligations 57,686 54;729
Accounts payable 408, 136 213,923
Payroll taxes withheld and accrued 1 ,304 1 ,019
Accrued salaries and wages 75,397 51 ,758
II
Accrued profit sharing fund contribution 110,597
Accrued income taxes 158,796
Dividends Flyable 105,743 -
1 Accrued interest 3,579 308
Other accrued expenses 38,501 38,908
TOTAL CURRENT LIABILITIES 1 , 122,689 635,038
I LONG-TERM DEBT AND LEASE OBLIGATIONS less current portion 426 507 484 193
II OBLIGATIONS, P , r
DEFERRED COMPENSATION 353,966 279,378
DEFERRED INCOME TAXES - 1 ,407
IISTOCKHOLDERS' EQUITY
Common stock, series A no par value, 100,000 shares
I authorized; 50,000 shares issued and outstanding 30,800 -
Common stock, no par value, 1 ,000 shares
authorized; 700 shares issued and outstanding - . 30,800
Retained earnings 1 ,830,747 1 ,610,418
II1 ,861 ,547 1 ,641 ,218
$3,764 ,709 $3,041 ,234
See accompanying notes.
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ROBERTS AUTOMATIC PRODUCTS, INC.
S
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TATEMENTS OF INCOME AND RETAINED EARNINGS
Years Ended December 30, 1988 and January 1 , 1988
December 30, January 1 , I
1988 1988
REVENUES
Sales $6,874, 174 $5,957,863
Sales returns 101 ,805 122,492 II
6,772,369 5,835,371
COST OF GOODS SOLD 5,054,268 4,627,415 II
GROSS PROFIT 1 ,718, 101 1,207,956
EXPENSES I
Selling 625,999 . 550,666
Administrative 612,980 . 5 7,719
1 ,2382.79 _12103,385 II
INCOME FROM OPERATIONS 479, 122 99,571
OTHER INCOME AND (EXPENSES) I
Bad debts (25, 100) -
Interest expense (58,069) (71 ,626) II
Loss on disposal of properties (1 ,011) (51 , 154)
Interest income 6,G58 5,332
Gain on disposal of properties 4,000 191 ,950
Credit and collection expense (1 ,705) -
II
Discounts earned and sundry income 2, 156 5,682
(73,471 ) 70, 184
INCOME BEFORE INCOME TAXES 405,651 169,755 I/
INCOME TAX EXPENSE ^41 ,579 71 ,971 II
,
NET INCOME 364,072 97,784
BEGINNING RETAINED EARNINGS 1 ,610,418 1 ,516, 134 II
Dividends (143,7;3) (3,500)
ENDING RETAINED EARNINGS $1 ,830,747 '' $1 ,610,418 I
II
II
See accompanying notes. II
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II , , ROBERTS AUTOMATIC PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
IIYears Ended December 30, 1988 and January 1 , 1988
January 1 ,
I December 30, 1988
1988 (Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
II Net income $364,072 $ 97,784
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 237,649 259,995
I Gain on disposal of properties (4,000) (191 ,950)
Loss on disposal of properties 1 ,011 61 , 154
Deferred compensation 74,588 61 ,974
II Deferred income taxes 41 ,578 (87,257)
Provision for bad debts 25, 100
(Increase) decrease in:
' Accounts receivable - trade (81 ,796) (230,889)
I Advances to employees ( 1 ,667) 3,008
Recoverable income tax payments (46,000) ' 38,482
Inventories (146,425) (60,374)
Prepaid expenses 3,750 (18,573)
Increase (decrease) in:
Accounts payable 189,213 (1 ,406)
II Payroll taxes withheld and accrued 285 (8,566)
Accrued salaries and wages 23,639 51 ,7 8
Accrued profit-sharing fund contribution 35,736 110,'97
Accrued income taxes (158,796) 158.796
' Accrued interest 4,4;2
Other accrued expenses V(407) 1 812
NET CASH PROVIDED
IBY OPERATING ACTIVITIES 561 ,811 250,797
CASH FLOWS FROM INVESTING ACTIVITIES
II Acquisition of properties (804, 120) (295,666)
Sale of properties 4,000 359,613
Increase in notes receivable - (30,000)
Collections on notes receivable 27,500 -
' ' NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES (772,620) 33,944
II CASH FLOWS FROM FINANCING ACTIVITIES
Reduction of long-term debt and lease obligations (54,729) (53,326)
Short-term borrowings 745,000 780,000
I Reduction of short term borrowings (460,000) (860,000)
Payment of dividends (3,500)
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES 192,271 (13,826)
IINET INCREASE (DECREASE) IN CASH (18,538) 147,915
1 CASH AT BEGINNING OF YEAR 164 ,263 16,338
CASH AT END OF YEAR $145,725 • $164,263
See accompanying notes.
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ROBERTS AUTOMATIC PRODUCTS, INC. II NOTES TO FINANCIAL STATEMENTS 7
December 30, 1988 and January 1 , 1988
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business ,
The Company is a manufacturer of screw machine products on a contract basis for
original equipment manufacturers. ,
Inventories
Inventories are stated at the lower of cost (including manufacturing overhead I
applied to work-in-process and finished goods) or market value using the first-
in, first-out method.
Depreciation
The company provides for depreciation of properties by the use of rates based
upon the following estimated useful lives of the various assets:
Land improvements 6-10 Years
Building 4-25 Years
Machinery 3-12 Years
Equipment 3-12 Years
Furniture and fixtures - factory 3-10 Yearc
Furniture and fixtures - office 3-10 Years
Vehicles 3 Years
Accelerated declining balance methods are used for properties acquired before
1951. The straight line method is being used for properties acquired after
1980. '
Amortization
Expenses incurred in connection with obtaining mortgage financing are being ,
amortized over the life of the mortgages ranging from 12-1/2 to 15 years.
Amortization expense amounted to $539 for the years ended December 30, 1988 and
January 1 , 1988. ,
Income Taxes
The Company, with the consent of its shareholders, has elected under the Int-
ernal Revenue Code to be an S corporation effective January 1 , 1988. In lieu
of corporation income taxes, the shareholders of an S corporation are taxed on
their proportionate share of the Company's taxable income. The corporation.
may, however, be liable for tax on built-in gains recognized within 10 years of
the effective date of the S election.
Prior to January 1 , 1988, deferred income taxes were provided for timing dif- '
ferences between financial statement and income tax reporting. The principle
differences consisted of the methods used to report bad debts, depreciation,
inventory costs, and deferred compensation for tax purposes. Due to the elec-
tion to be treated as an S corporation, the deferred tax benefits accrued as of
January 1 , 1988 have been removed from the books and charged as an expense to
net income. '
Fiscal Year
The Company's policy is to close it's books on the Friday closest to the end of
the calendar year.
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ROBERTS AUTOMATIC PRODUCTS, INC. ,
II NOTES TO FINANCIAL STATEMENTS
December 30, 1988 and January 1 , 1988
INOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Retirement Plans
The Company has a profit-sharing plan covering employees that meet certain
eligibility requirements. Management has adopted a formula using pre-tax pro-
, fits for computing contributions to the plan. Profit-sharing expense is
$147,343 for the year ended December 30, 1988 and $110,597 for the year ended
January 1 , 1988.
IIChange in Presentation
The December 30, 1988 financial statements include a statement of cash flows '
II showing cash provided and used by operating, investing, and financing activi-
ties in place of a statement of changes in financial position showing changes
in working capital as presented in prior years. Amounts for January 1 , 1988,
II have been restated to conform with the December 30, 1988, presentation.
NOTE B - INVENTORY
IIInventory details are as follows:
12/30/88 1/1/88
I Materials $ 153,455 $ , 206,254
Work-in-process 212, 197 200,254
Finished goods 679,035 497,438
II Generated scrap 61 ,470 55,786
$ 1 , 106, 157 , $ 959,732
IINOTE C - PROPERTIES '
Details of the properties are as follows:
II - December 30, 1988 January 1 , 1988
Cost Depreciation Cost Depreciation
Land $ 41 ,905 $ 41 ,905
ILand improvements 8,827 $ 7,786 7,732 $ 7,703
Buildings 632, 108 401 ,657 630,398 377,213
Machinery ,2, 177,924 1 ;030,533 1 ,510,674 952,432
I Equipment 765,750 650,491 685,358 620,936
Furniture & fixtures-factory 584 ,064 498,231 577, 105 476,904
Furniture & fixtures-office ' 259,259 171 ,894 255,448 133,086
II Vehicles 42,651 22,462 42,651 16,462
4 ,512, 188 $2,783,054 3,751 ,271 $2,584 ,736
Accumulated depreciation (2,783,054) (2,584,736)
11 $1 ,729,434 $1 , 166,535
II Depreciation (including amortization of capital leases) amounted to $237, 110
and $259,456 for the years ended December 30, 1988 and January 1 , 1988 respec-
tively.
II
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ROBERTS AUTOMATIC PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
December 30, 1988 and January 1, 1988
NOTE D - BANK LINE OF CREDIT '
The Company has established a line of credit in the amount of $750,000 with
National City Bank through March 31 , J989. The line of credit is unsecured and '
carries an interest rate equal to the bank's prime rate ,plus one-half percent
(the effective rate of borrowing was 11% at December 30, 1988 and 9.5% at Janu-
ary 1, 1988) . There is a balance of $285,000 outstanding from this source at
December 30, 1988. There was no balance of debt outstanding at January 1 ,
1988.
The credit arrangement contains various restrictive covenants including minimum
net worth and working capital requirements.
NOTE E - LONG-TERM DEBT AND LEASE OBLIGATIONS
December 30, January 1 ,
Mortgage payable dated September 12, 1975 1988 1988
in the amount of $350,000 due in monthly
installments of $3, 120 which includes I ,
principal and interest at the rate of 9-3/4%
per annum to October 1, 1990 when the remaining
principal balance is due. Secured by the ,
Company's land and building. $261 ,892 $272,292
Mortgage payable dated November 4, 1977
in the amount of $200,000 due in monthly
installments of $1 ,715 which includes
principal and interest at the rate of
9-1/4% per annum to October 1 , 1990 when
the remaining principal balance is due.
Secured by the Company's land and building. 162,862 167,691
Contract payable arising from redemption of
Company stock dated December 12, 1977 in
the amount of $288,000 due in monthly in-
stallments of $2,810 which includes principal
and interest at the rate of 6% per annum to
November 12, 198; when any remaining prin-
cipal is due. This contract is unsecured. 30,006 60,913
Capital lease payable dated November 20,
1986 due in monthly installments of $995
which includes imputed interest at the
rate of 9.82% per annum to October 15, 1991 .
Secured by computer equipment covered under
the lease agreement. 29,433 38,021 t
Total long-term debt and lease obligations 484, 193 . 538,922
Less current portion 57,686 54,729
Net long-term debt and lease obligations $426,507 $484, 1,93
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II ,
II ROBERTS AUTOMATIC PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
December 30, 1988 and January 1 , 1988
II
NOTE E - LONG-TERM DEBT AND LEASE OBLIGATIONS (CONTINUED)
II Principal payments on debt and future minimum lease payments under capital leases due
within the next five years are as follows:
II Principal Minimum
Payments Lease
on Debt Payments Total
II 1989 $ 48,215 $ 9,471 57,686
1990 406,545 10,444 416,989
1991 - 9,518 9,518
$454,760 $ 29,433 $484, 1.93
II i
Properties recorded as capital leases are included in office furniture and fix-
' tures at a cost of $47,419. Accumulated amortization on these properties was
$20,548 and $11 ,064 at December 30, 1988 and January 1 , 1988 respectively.
INOTE F - INCOME TAXES
The provision for income tax expense consists of the following components:
IIDecember 30, January 1 ,
1988 1988 '
II Current tax $ - $159,228
Deferred tax 41 ,579 (87,257)
$ 41 ,579 $ 71 ,971_
Current income taxes were increased by $9,508 at January 1 , 1988 for the effect.
Iof investment tax credit recapture.
The following taxable transactions affecting the Company's S Corporation
I accumulated adjustments account have been reported to the Company's sharehol-
ders:
IIAccumulated Adjustments Account
Balance - January 1 , 1988 $ -
Add itions -
II Non separately stated taxable income $430,726
Separately stated items of income 6,258
Total additions 436,984
I Reductions -
Distributions paid and accrued 143,743
Other reductions 14,211
I Total reductions, 157,954
Balance - December 30, 1988 $279,030
I -8-
• I/
ROBERTS AUTOMATIC PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
December 30, 1988 and January 1 , 1988
NOTE G - DEFERRED COMPENSATION
The Company entered into a deferred compensation agreement with its president during
the fiscal year ended December 26, 1980. The plan is not being funded by the company,
although an accrual is being made periodically which will result in an accrued amount
at the end of the term of active employment of the participant which is not less than
the actual present value of the estimated payments to be made. The accruals amounted
to $741 ,587 for the year ended December 30, 1988 and $61 ,974 for the year ended January
1 , 1988. Such amounts are set forth on the balance sheet as long-term debt and an
equal amount has been charged to expense for the respective years.
NOTE H - LIFE INSURANCE
The Company is the owner and beneficiary of yearly renewable and convertible term life
insurance with a face value of $250,000 on the life of its president. The final
expiration date on the policy is June 12, 2033.
NOTE I - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION '
Interest and income taxes paid
Cash paid for interest and income taxes for the years ended December 30, 1988 and
January 1 , 1988 were as follows:
December 30, January 1 , '
1988 1988
Interest $ 51,798 I-76,078
Income taxes (net of refunds) $2011,796 $(38,050)
Noncash investing activities
During the year ended December 30, 1988, the Company sold equipment for $3, 100 which II
at December 30, 1988 had not been collected.
NOTE J - COMMON STOCK
The Board of Directors adopted restated articles of incorporation which authorize the
corporation to issue 100,000 Series A voting and 100,000 Series B non-voting shares of
no par value common stock. On August 1 , 1988, all shares of the old issued and out-
standing common stock of the corporation were surrendered in exchange for 50,000 newly
authorized shares of Series A no par value, voting common stock.
The newly issued shares of Series A common stock are subject to the terms of a stock
redemption agreement between the corporation and its shareholders.
11
No
SUPPLEMENTARY INFORMATION
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ROBERTS AUTOMATIC PRODUCTS, INC.
SCHEDULES OF COST OF GOODS SOLD
Years Ended December 30, 1988 and January 1 , 1988
December 30, January 1,
1988 1988
Beginning inventories $ 959,732 $ 899,358 1
Materials purchased 1,748,911 1 ,759, 186
Scrap sales 403,624 393,675
Net materials purchased 1,345,287 1 ,365,511 ,
Outside work 423,023 268,640
Costs of purchases 1 ,768,310 1 ,634, 151 1
Costs of available materials 2,728,042 2,533,509
Ending inventories 1 , 106, 157 ' 959,732
Cost of materials 1,621 ,885 1,573,777
Direct labor 1 ,424,055 1 ,233,361
Indirect labor 690,825 618,071
Manufacturing expenses 1,317,503 1 ,202,206
COST OF GOODS SOLD $5,054,268 $4,627,415 1
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ROBERTS AUTOMATIC PRODUCTS, INC.
II SCHEDULES OF LABOR AND MANUFACTURING EXPENSES
Years Ended December 30, 1988 and January 1 , 1988
II
December 30, January 1 ,
II 1988 1988
DIRECT LABOR
Base Premium payments $1 , 117,021 $1 ,020,585
I307,034 212,776
$1 ,424,055 $1 ,233,361
1
II INDIRECT LABOR
Supervision $ 231 ,889 $ 235,798
Base wages 339,768 319,842
IPremium payments 119, 168 62,431
$ 690,825 $ 618,071
I
MANUFACTURING EXPENSES
II Perishable tools $ 136,968 $ 118,534
Tool steel 7,290 9, 171
Cutting oils 13,925 4,271
II Lubricants 8, 174 20,C0u
Operating supplies 88,525 84,'x;3
Service supplies 48,563 47,242
II Utilities 56,221 53, 176
Depreciation 192,301 207,500
Property taxes 30,449 25,701
Maintenance - machinery and equipment 111 ,237 97,814
I Maintenance - building and grounds 30,212 25, 187
Moving and rearrangement 8,781 2, 110
Insurance 36,032 43,516
I Payroll taxes 182,331 153,656
Workers compensation insurance 50,312 45,093
Profit sharing fund contribution 113, 145 85,657
I Group insurance 140,584 ' 131 ,486
Employee welfare 20,525 20,834
Freight and express 25,325 21 ,397
Sundry 16,603 5,403 '
II $1 ,317,503 $1 ,202,206
II
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•
ROBERTS AUTOMATIC PRODUCTS, INC.
SCHEDULES OF SELLING AND ADMINISTRATIVE EXPENSES
II
Years Ended December 30, 1988 and January 1 , 1988
December 30, January 1, II
1988 1988
SELLING I
Executive salary $209,066 $201 ,256
Other salaries 99,472 77,748
Commissions 210,393 182,757
II
Vehicle operating expenses 4,040 2,851
Travel and entertainment 7,467 13,385
Credit reporting service 4,416 4, 124
Supplies 5,290 2,668 il
Utilities 855 807
Property taxes 3,806 3,213
Depreciation 6,000 6,897 II
Advertising 22,876 10,376
Insurance 1,933 1 ,925
Payroll taxes 8,349 6,515 I
Group insurance 6,224 5,627
Employee welfare 3, 122 2,750
Profit sharing fund contribution 15, 147 11 ,635
Trucking I 15,807 15,387 , II
Sundry 1 ,736 745
$625,999 $550,666 I
II
ADMINISTRATIVE
Executive salaries $234, 136 $224, 161
Office salaries 130,512 132,349 II
Telephone 9,417 8,267
Data processing 16,600 14, 122
Travel 10,506 3,510 II
Supplies 11 , 143 8,632
Utilities 855 807
Property taxes 3,806 3,213 II Depreciation and amortization 39,348 45,598
Maintenance 6,933 7,013
Insurance 1,705 ' 1 ,577
Payroll taxes 18,450 18,505 II
Group insurance 17,243 14,965
Employee welfare 6,990 6,561
Profit sharing fund contribution 19,051 13,305
II
Directors fee 18,000 18,000
Professional services 51 ,568 22,078
Contributions 7,333 6,352
II
Dues and subscriptions 6,493 5,723
Sundry 2,891 ' 2,981
$612,980 $557,719 I
-12- 11
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ROBERTS AUTOMATIC PRODUCTS, INC.
FIVE YEAR SUMMARY
I
II Year Ended
12/28/84 12/27/85 12/26/86 1/1/88 12/30/88
Gross sales $5,801,079 $4,884,201 $5,193,022 $5,957,863 $6,874,174
Less sales returns 150,759 177,886 149,659 122,492 101,805
II NET SALES 5,650,320 4,706,315 5,043,363 5,835,371 6,772,369
Be;inning inventories 769,463 1,142,034 1,005,585 899,358 959,732
Net materials purchased 1,795,094 1,285,297 1,355,190 1,634,151 1,768,310
Coats of available materials 2,564,557 2,427,331 2,360,775 2,533,509 2,728,042
I Ending inventories 1,142,034 1,005,585 899,358 959,732 1,106,157
Coat of materials 1,422,523 1,421,746 1,461,417 1,573,777 1,621,885
VALUE OF SERVICES PRODUCED 4,227,797 3,284,569 3,581,946 4,261,594 5,150,484
I Direct labor 1,130,746 982,645 1,062,662 1,233,361 1,424,055
Indirect labor 528,964 492,232 538,959 618,071 690,825
Manufacturing expenses 1,088,896 943,580 1,050,742 1,202,206 1,317,503
Labor and manufacturing costs 2,748,606 2,418,457 2,652,363 3,053,638 3,432,383
GROSS PROFIT 1,479,191 866,112 929,583 1,207,956 1,718,101
Selling expenses 418,228 400,635 469,930 550,666 625,999
II Administrative expenses 481,367 468,520 489,450 557,719 612,980
899,595 869,155 959,380 1,108,3b5 1,238,979
INCOME (LOSS) FROM OPERATIONS 579,596 (3,043) (29,797) 99,571 479,122
I Interest expense 60,272 84,867 70,873 71,626
Lora on disposal of 58,069
properties 9,597 180 61,154 1,011
Gain on disposal of properties (1,168) (12,892) (376) (191,950)
Other (revenue) expense (4,000)
P (14,873) (4,190) (3,610) (11,014) 18,391
II 53,828 67,965 66,887 (70,184) 73,471
INCOME (LOSS) BEFORE INCOME TAXES 525,768 (71,008) (96,684) 169,755 405,651
Provision for income taxes 215,893 (54,824) (39,686) f 71,971 e 41,579
II NET INCOME (LOSS) $ 309,875 $ (16,184) $ (56,998) $ 97,784 $ 364,072
II ..00101....00101..11
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